Whitbread set to hand back £900m

Whitbread is expected to announce a potential £900m return of cash to shareholders this week alongside a trading update.

The pubs and hotels group promised to pass on cash earned from the recent sale of gym chain David Lloyd, which netted £925m.

It also said it would substantially increase its levels of debt, allowing it to free up the cash made.

However, the recent credit crunch in the markets may mean that the company will hold back on its commitment to increase its debt and return the money in two tranches - one in the fourth quarter of this year, for £450m, and the other in March next year.

Since 2005, Whitbread has returned £1.16bn to shareholders by streamlining the business and selling off assets such as the 50% stake in Pizza Hut and the TGI restaurant chain.

Chief executive Alan Parker and finance director Chris Rogers have won praise for turning round the company's fortunes and helping to insulate it against the predatory advances of private equity groups such as Starwood Capital, which has been stalking the business for more than a year.

Premier Travel Inn, the country's number one budget hotel chain, has remained the company's star performer-with analysts predicting like-for-like sales up ten per cent, despite a strong performance in the same period last year.

Costa Coffee, which has seen huge investment as well as international expansion, has opened a further 50 outlets in the past six months.

Growth, boosted by the cold weather, is expected to be about five per cent.

It has been speculated that Costa could be spun off and listed on the stock market, leaving Whitbread solely as a hotels company.

The share price has suffered in the past few weeks, closing at 1575p on Friday, drawing speculation that potential bidders may come out of the woodwork.